Trend's exclusive interview with Bulgaria's Energy Minister Temenuzhka Petkova on the occasion of the 5th meeting of the Southern Gas Corridor Advisory Council in Baku

Question: Recently you had a meeting with Azerbaijan's Foreign Minister Elmar Mammadyarov, during which very fruitful discussion were held on cooperation between Azerbaijan and Bulgaria in the energy sphere. How could you highlight the significance of these talks?

Answer: The meeting with Minister Mammadyarov was very fruitful and we discussed a number of aspects of our bilateral cooperation. The main themes were the supply of Azerbaijan natural gas to Bulgaria and the development of regional and EU gas projects, such as the Southern Gas Corridor, the IGB, and the regional gas hub 'Balkan'. The meeting preceded the very successful fifth meeting of the Bulgarian-Azerbaijan Intergovernmental commission for economic co-operation in Sofia, on 6 and 7 November 2018. I would like to underline that Azerbaijan is a strategic partner for us, with whom we want to develop long-term cooperation. Historically, our two peoples have always enjoyed traditional friendly relations. Political relations between the two countries are at the level of strategic partnership and we think that it is time they develop into a fruitful economic partnership. In the field of energy, we have an excellent partnership, particularly with regard to the supply of Azerbaijan natural gas to Bulgaria and the region of Southeast Europe. For us, it is extremely important to ensure the supply of the contracted 1 bcm /year of Azerbaijan natural gas for Bulgaria from the second phase of the gas field Shah Deniz. The strategic energy partnership between the two countries includes the supply of Azerbaijan natural gas to Bulgaria from the Southern Gas Corridor, future joint supply of Azerbaijan natural gas through the territory of Bulgaria to other countries of the region, via the Interconnector Greece-Bulgaria, the existing gas transmission system of Bulgartransgaz EAD and the project for regional 'Balkan' gas hub. We expect Azerbaijan to be one of the key natural gas suppliers for 'Balkan' gas hub. Another opportunity we explore is to intensify the cooperation in SOCAR's investment in the gas distribution sector in Bulgaria.

I would like to emphasize once again that Bulgaria has always supported the development of the Southern Gas Corridor, as the country is an integral part of it through the project for Interconnector Greece –Bulgaria. In this connection, the Bulgarian Ministry of Energy has provided its institutional support for SOCAR's application for grants under the EU Connecting Europe Facility for the implementation of specific activities on TANAP, with which the Bulgarian side effectively supports the implementation of the Southern Gas Corridor.

Q.: The Interconnector Greece - Bulgaria project is going on at full speed with tender procedures on stream. How could you describe the role of this project in turning Bulgaria into an energy hub?

A.: The Interconnector Greece- Bulgaria is a key project for Bulgaria and the countries of the region. The construction of the Interconnector Greece – Bulgaria aims to ensure diversification not only of routes but also of natural gas sources for Bulgaria and the region. Through IGB, as part of the development of the Southern Gas Corridor, Bulgaria and its neighbouring countries will have access to alternative supplies from the Caspian region and from the existing and future LNG terminals. The project provides infrastructure for the transport of natural gas from the Southern gas corridor and ensures security of supply for Bulgaria and SEE. It is defined by the EC as a 'Project of common interest' and is included in the list of priority projects of CESEC.

The implementation of the project is also strategically important due to the many opportunities for connection with other major energy projects. The project creates connectivity opportunities and is in synergy with other future projects in the region, such as the LNG terminal in Alexandroupolis in northern Greece and the EastMed gas pipeline project, which will provide gas supplies from the Eastern Mediterranean - from the offshore gas fields of Israel and Cyprus, and in the future from Egypt. IGB is of strategic importance for the implementation of the Vertical Gas Corridor, supported by the EC, connecting the networks of Bulgaria, Greece, Romania and Hungary. The project will seriously contribute to the development of the concept of the Bulgarian country for the implementation of the key regional 'Balkan' gas hub. The implementation of the gas hub also creates opportunities for the transport of Azerbaijan natural gas through the gas interconnector Greece – Bulgaria, the gas-transmission system of Bulgartransgaz EAD, the new infrastructure of the gas hub and the remaining interconnections – to Romania, Serbia and Macedonia and to their neighbouring countries respectively.

To provide supplies for the hub from different sources, Bulgaria will be involved through Bulgartransgaz as a shareholder in the construction of the LNG terminal near Alexandroupolis. The decision was taken at the end of last year. Thus we will also be able to provide supplies from more distant destinations, including the USA.

The project company ICGB is currently actively working to complete the tender procedures for selection of line-pipe supplier, EPC and owner's engineer. We expect these activities to be finalized successfully in May this year. We plan to start the construction of IGB immediately afterwards and to end it in 2020 in synergy with the launch of TAP, with the aim of ensuring 1 bcm per year under the long term contract with the Consortium Shah Deniz. The issues of the structure and the sources of financing of the project are fully resolved.

I would like to share that on 21.12.2018. ICGB signed a contract with the Managing Authority of the Operational Programme 'Innovation and Competitiveness' for the award of a grant of EUR 39 million under the project for construction of the interconnector Greece – Bulgaria.

Q.: At what stage is the implementation of the project for expansion of Chiren underground gas storage facility in the country? Is Bulgaria still interested in Azerbaijani SOCAR's participation? Are you holding talks on this issue?

A.: The expansion of the capacity of the underground gas storage facility in Chiren is important for our country's energy security and is in synergy with the regional gas hub 'Balkan'. Technical studies are currently being carried out before the actual expansion of the storage capacity of UGS Chiren which will start with new drillings and construction of the ground infrastructure. Its capacity is estimated to reach up to 1 bcm with a daily withdrawal capacity of up to 10 million cubic metres. The involvement of SOCAR that has exclusive experience and expertise in such activities in future tenders for the expansion of UGS Chiren is welcomed by the Bulgarian side.

Bulgaria closely monitors the forecasts for consumption on the regional and European gas markets and is involved in the development of important gas projects. Over 30 years our country has been the gas hub in SEE and it intends to maintain and expand its position as a main transporter of natural gas in the region, through the implementation of new interconnectors with Greece, Serbia and Turkey, the infrastructure of the regional 'Balkan' gas hub, including through the expansion of the capacity of UGS Chiren.

Q.: How do you assess the possibility for SOCAR's investing in household gas supply in Bulgaria? How could Bulgaria benefit from this? Are you ready to hold talks on this matter?

A.: As you know, Azerbaijan's interest in the gasification of Bulgarian cities was announced at the meeting in Baku between Prime Minister Boyko Borissov and the President of Azerbaijan Ilham Aliyev in January 2018. The Azerbaijan state oil company has successfully invested in this sector in Georgia and we will be pleased if the company transfers its experience in Bulgaria as well.

In 2018, we held fruitful discussions and conversations with SOCAR representatives on the opportunities to participate in the development of the gasification in Bulgaria. In particular, it is about investments by the Azerbaijan state oil company in gas distribution and mainly in household gas supply, which has a huge potential for development in Bulgaria.

SOCAR is currently studying Bulgarian gas distribution sector. In this regard, at the end of last year, SOCAR announced a procedure for preparing a feasibility study on investment opportunities in the gas distribution sector in Bulgaria. In the case of positive results of the feasibility study, in the second half of this year, we expect SOCAR to start the first investments in the gas distribution in Bulgaria.

Q.: Azerbaijan and Bulgaria have entered into agreement on supply of 1 billion cubic meters of gas. How do you assess the possibility of increasing the volume in the future?

A.: The state gas company Bulgargaz EAD has concluded a delivery contract of 1 bcm /year with the Consortium Shah Deniz from the second phase of Azerbaijan gas field. In practice after 2020, the Azerbaijan natural gas from Shah Denniz 2 will meet about 25%-30% of the consumption of natural gas in Bulgaria, which is a serious share and will significantly increase our energy security and promote competition on the Bulgarian gas market.

In the future, in the presence of additional volumes of natural gas at competitive prices in Azerbaijan, Bulgaria would be interested in supplying additional volumes of Azerbaijan natural gas. Our countries could also make joint gas supplies for the countries of Southeast Europe using the well-developed Bulgarian gas network and the infrastructure of the future regional 'Balkan' gas hub.

Taking into account the significant capacity of the Bulgarian gas transmission system, our country's multi-annual experience as a major gas transporter in the region and the strategic geographical location, Bulgaria, together with the European Commission, has developed a project for regional gas hub 'Balkan', which would have a crucial importance for Southeast European countries. The feasibility study, co-financed by the EC, has shown that this project is extremely important and economically advantageous for Bulgaria, SEE, the EU and the supplier countries. Taking into account the positive results of the feasibility study, we expect Azerbaijan to be one of the natural gas suppliers for the regional 'Balkan' gas hub. The gas hub concept consists of two parts, the construction of an infrastructure and an operating gas exchange. In this connection, Bulgartransgaz registered at the beginning of the year a subsidiary 'Balkan gas hub' EAD. The company will operate trading platforms for the needs of natural gas markets within 'Balkan' gas hub. In synergy with the physical infrastructure of the hub, the necessary prerequisites for the construction of the first liquid physical and commercial gas hub in the region of Southeast Europe based in Bulgaria will be provided. We estimate in the future, up to 49% of the shares of 'Balkan gas hub' EAD to be provided to other legal entities and individuals, such as gas distribution and gas network operators, licensed gas exchange operators and trade platform operators, employers' organizations, natural gas consumers, companies engaged in extraction and/or trade of gas, etc. This would contribute to the implementation of the Balkan gas hub concept and increase in the liquidity of the natural gas market in Bulgaria and Southeastern Europe.

I believe that the implementation of these key gas projects will further increase the capacity of the Bulgarian gas transmission system, thereby helping Bulgaria to maintain and expand its position on Europe's gas map. Accordingly, our strategic energy partnership and our joint projects will turn Azerbaijan into one of the main and reliable suppliers of natural gas, not only for the SEE, but also for the EU.